Thursday, September 24, 2009

A Russian Oligarch Buys Into the NBA

I sent out a Twitter post on this, yesterday. Here are more of the details.

The investor in the New Jersey (Soon to be Brooklyn) Nets is Mikhail Prokhorov. He is listed by Forbes as the richest man in Russia. Like all Russian oligarchs, he became an operator during Russia's "privatization deals" that followed the collapse of the Soviet Union.

In 1993, the Onexim bank that he headed acquired Norilsk Nickel

Under Prokhorov's control, Norilsk became much more efficient and profitable. He resigned as Norilsk chairman in 2007 and sold off his shares for $7.5 billion, thus controlling a bundle of cash, just before world markets collapsed. Timing or luck, who knows? He did suffer other losses, and Forbes estimates his wealth has declined from $16 billion to $9 billion, but this still leaves him in better shape then other Russian oligarchs, such as, Roman Abramovich, who lost more than $9 billion, and Oleg Deripaska, who lost around $35 billion, according to Forbes.

Prokhorov retains substantial interests in other metals companies through Onexim, including shares in gold miner Polyus and Rusal, the world's largest aluminum company.

Prokhorov also appears to be quite the basketball junkie. He owns a share in the Russian basketball team CSKA, and played basketball in high school and college.

Apparently, he sees his investment in the Nets as a way to improve the quality of Russian basketball. Here is a translation of his statement from his blog about his investment in the Nets. It appears, he really laid out his thinking on why he invested in the team, and an accompanying arena that will be built for the Nets to paly in. I don't think I have ever seen this from a billionaire about an investment before:
Greetings to all!

I realized all of a sudden that, well, it’s been quite a while since I’ve written, and there’s a reason for that—the last few months we’ve been swamped at work with routine tasks, and there was nothing really interesting to report. But now there is something—not long ago our group received a proposal to participate in a business project concerning the building of a new arena in Brooklyn (New York) and to become a shareholder of the basketball team “New Jersey Nets,” which in two years should move to Brooklyn and be called “Brooklyn Nets.”

Most interestingly, I learned of this project from the papers, about how I would play an active role in it! And what a surprise, then, that within a few days after the stories came out in the press, shareholders of the team reached out to us with a real proposal to discuss possible collaboration! The discussion concluded with us receiving a firm offer from the American shareholders to be involved in the project. For our group, participation in such a complex project undoubtedly is interesting only in the event that NBA technology can be used for the systematic development of basketball in Russia. Our existing professional league, as everyone knows, is not able to independently keep itself afloat, and because of that, the financial well-being and existence of clubs are entirely dependent either on the support of governors or businessmen-fans of the sport, and any changes to their financial position leads to instability in the development of a club.

Another problem—the system of training young sportsmen and the ability for them to receive playing time in distinguished clubs. When you support a professional club, there emerges the entirely natural desire to quickly achieve a result, and the quick result leads to inviting foreign players to the club. And our young players have in recent years been “sitting on the bench” without adequate playing time. (I have no qualms stating that the PBK TsSKa team “killed” a few young players with great prospects who at age 16-17 “upset” their European counterparts in the youth Euroleague by 30 points). There is way out of this—we need to change the model of basketball development in Russia with the aid of super modern systems of training sportsmen (this is the innovative model). The basis for development should be a strong student basketball league beginning in children’s sports schools. We’ll get to work on this, if we realize this deal.

Over the weekend, I sent the “New Jersey” shareholders a counter proposal about our involvement in the project with an emphasis on Russian interests:

Commercial conditions:

“ONEXSIM” provides financing for the construction of the new arena in Brooklyn guaranteed by a significant share in the project.

a controlling shareholder interest in the “New Jersey” team will be transferred to the group for a symbolic price.

as part of this deal, the group will attract correspondent financing in Western banks (I consider that if this works out, the deal would be just unique!).

Qualitative conditions:

Russia would achieve a position of equality among the elites of world basketball.
access to all modern technology and training methods with the possibility of using them in Russia.

apprenticeships for leading Russian trainers and managers in the NBA.
the ability to send our best students to NBA training camps.

For our group “ONEXSIM”, the realization of this very profitable business project, to which we were invited thanks to the world financial crisis (there has never been a foreign owner of an NBA club), will be yet another path for developing our sports interests alongside the biathlon, support for children’s sports and sports of high achievements.

I think that there will be many skeptics (among them false patriots), but that will just make it more interesting as we move forward.

To all I wish good luck.


  1. Russia also has the false patriot label?

    While American oligarchs shop overseas, Russian oligarchs pick up a distressed NBA team.

    Maybe James A. Baker, III or David Rubenstein will return the favor and pick up Russian oil/gas properties.

  2. It was timing. He was the only one of them who realized what was coming and had the guts to adjust his interests accordingly. Also he was speaking in an interview about the second, and much worse, wave even before the first one ended. So he does have a clue.

    As for "picking up" Russian oil/gas properties by foreigners, that was done in the '90s, then mostly reversed, and not tolerated any more. The lesson was learned. In a way it was much like having Fed in control of US economy: an intracranial parasitic worm with big plans.

  3. Maybe some of that U.S. humility paid off.

    March 2009
    An odd assembly of American dignitaries were in Russia. The list includes James A. Baker, III, Henry Kissinger, William Perry, George Schultz, and Sam Nunn.

  4. Good for him…even though I don’t watch much sports, it’s overrated and these talented sportsman are most definitely over paid.